By Kate Dourian
06-10-04
This summer, I sailed from England to St Petersburg, Russia. I mention this
not only because the trip was memorable, but because the cruise ship was filled
with Americans on their way to the former capital of Imperial Russia. This is nothing new but a case of history repeating itself. At the time of
the Bolshevik Revolution of 1917, which actually began in St Petersburg, Russia
had overtaken the United States as the biggest oil producer in the world and
American companies, such as Standard Oil, corporate predecessor of supergiant
ExxonMobil, were buying up Russian oil acreage.
After a brief lull, the giants grew hungry for new territory. This time
around, however, the terrain was different. Low oil prices had given way to
record high prices and the political landscape had changed dramatically. In
1990, the big powers were joined in a global alliance against the invading
armies of Saddam Hussein in Kuwait. Saudi Arabia was Washington's strongest Arab
ally.
Today, big oil is operating in a vastly different environment. The Middle
East and Iraq are still in their sights but the complexity and danger of going
into Iraq has forced the need to think some more. Hence, Russia's growing
importance as an economic partner.
One area where ConocoPhillips might benefit from its new partnership is in
Iraq, where LUKoil had rights to develop the West Qurna oilfield. It lost the
concession after a dispute with Saddam's government in the months before the
war. A tie-up with a US major can help to open doors in Baghdad these days.
China is set to overtake the United States as the biggest importer of crude
oil some time this century and it will not take too kindly to being locked out
of Iraq or seeing a pipeline from Russia diverted to Japan.
Kate Dourian is Middle East editor of Platts, the energy information division
of the McGraw-Hill Companies.
Source: Gulf NewsRussia to play key role as crude reserves diminish
Russia is not only an increasingly popular tourist destination for Americans, it
has become the final frontier for Western oil companies looking to expand their
reserve base. With hardly any area left to explore anywhere else on Earth save
Iraq the multinationals are sinking billions of dollars into Russia.
The move by multinationals to acquire stakes in Russian oil and gas companies
came after alull in corporate mergers and take-overs. The 1990s was the era of
mega mergers in the oil industry. Low oil prices and stiff competition forced
oil companies to form alliances. As a result, we got giants in the shape of
ExxonMobil, BP, which absorbed US oil companies Arco and Amoco, then
ChevronTexaco, ConocoPhillips and Total, formerly TotalFinaElf.
Contrary to the situation today, where Asian oil demand has surpassed
expectations, the Asian economy was on the brink of recession as the 20th
century drew to a close. Oil prices slumped to record lows.
It is within the context of these developments that the recent tie-up between
ConocoPhillips and Russian oil giant LUKoil should be viewed. The purchase by
the US company of an initial 7.59 % stake in LUKoil is an alliance that carries
wider economic and political implications. Moscow is determined to present
itself as a geographically closer and politically more reliable supplier of
crude oil to the United States while Washington wants to diversify the source of
its oil imports.
The Chinese will be watching these developments with alarm. Beijing is desperate
to secure oil from the Middle East to feed growing demand for oil.
It is not entirely unreasonable to predict that the next confrontation between
the world's powers will be over diminishing crude oil reserves. Russia's role
will be key as it moves up the oil rankings towards the top spot it held before
the Bolsheviks stormed the Winter Palace.